Sustainability of Kenya’s Total Public Debt
Abstract
This paper analyzed the sustainability of Kenya’s total public debt using the present value
budget constraint approach. Unit root tests were conducted to test for the stationarity of the
budget balance. The country’s debt was found to be stationary when two structural breaks
were taken into account. Break dates were identified as 1996 and 2001. Cointegration tests
were also carried out and the results indicated Kenya’s total public debt was weakly
sustainable. This paper also examined the uses of foreign debt and recommended that the government should increase its focus on the transport, communication and the energy sectors as these sectors have the ability to generate revenue that can be used to repay debt.
Publisher
University of Nairobi